Cablevision Jumps on Adelphia Hedge - TheStreet

Shares in

Cablevision Systems


bounced late in the day Friday as the company shook off some of the taint of

Adelphia Communications'



Cablevision -- which like Adelphia is both a highly leveraged operator of cable systems and one that's under the firm control of the founding family -- issued a release Friday asserting that it had only limited exposure to the cratering of the Adelphia shares it received as part of a deal with Adelphia last year.

The market responded positively to the news on what had been an otherwise bleak day for the New York-based Cablevision. The company's shares shot up after Cablevision made its announcement, closing at $19.35, up 6% for the day. Earlier on Friday, Cablevision's shares -- down from a 52-week high of $62 -- established a new 52-week low of $17.78.

In its announcement, Cablevision said it had used three different derivative contracts to hedge the value of the 10.8 million shares -- then worth $422 million -- that it received from Adelphia as part of a cable system sale in 2001. In the worst-case scenario of Adelphia's shares becoming worthless, Cablevision says it will be out $50 million as part of an interest payment and will have to pay taxes on an accelerated $300 million taxable gain.

Separately, President and CEO James Dolan, son of founder Charles Dolan, denied reports that the company would be offering stock or convertible stock soon. "Let me state emphatically," Dolan said in a statement, "that Cablevision is also committed to living within our means and to taking appropriate action in the near term to ensure that we do so."

Joe Galzerano, high-yield analyst for CIBC World Markets, says that Cablevision isn't suffering in the market from a perceived resemblance to Adelphia. Rather, he says, investors are focusing on problems specific to Cablevision, such as the company's mixup over the televising of Yankees games and Cablevision's admitted need for additional funding next year.

In fact, says Galzerano, Adelphia is an equal-opportunity deliverer of woe. "I would say that Adelphia is having an impact on all the cable systems," he says, "not anyone in particular." Galzerano has no rating on Adelphia or Cablevision; his firm hasn't done recent investment banking for them.